Woolway (Valuation Officer) v Mazars LLP [2015] UKSC 53

In one of the most widely-anticipated business rates judgments in recent memory, the Supreme Court has decided that two non-adjacent floors occupied by Mazars in a single office block should be treated as two separate hereditaments for rating purposes, thereby increasing the amount payable by the ratepayer.

Mazars occupy floors 2 and 6 in an eight storey, modern office building under separate leases. The floors are accessed by way of a bank of lifts in the common parts of the building. The Valuation Officer entered these floors with their own separate values in the rating list; Mazars argued that the floors are functionally interdependent and sufficiently close so as to constitute a single hereditament. Mazars’ argument found favour with the Upper Tribunal and the Court of Appeal.

In allowing the appeal by the Valuation Officer, the Supreme Court considered three key principles on whether units should be treated as single or multiple hereditaments:

  • Geographically, are the units linked so that direct communication can be achieved between them without access onto another’s property? If direct communication is impossible, then there would be a strong presumption that the units are separate hereditaments.
  • If the units are distinct, is the use of one unit necessary for the enjoyment of the other? If the units could not reasonably be let as single properties then that would indicate a single hereditament.
  • In determining principle (2) above, the question is not what use the occupier makes of the units but on the physical character of the units. 

It is the building rather than the nature of the occupation which falls to be assessed, so if the ‘geographical’ test stated in principle (1) above is not satisfied, the ‘functional’ test should only be applied in the narrow circumstances outlined in principles (2) and (3). On the facts put before the Court, Mazars could prove neither the geographical nor the functional tests. 

Where does this decision leave us?

  • affects all ratepayers who have spaces in multi-occupied buildings where there is no direct intercommunication between them;
  • ratepayers likely to find themselves with higher rates bills, as distinct spaces will be subject to their own separate rates bill. There are numerous properties affected by this decision which the Valuation Office will now target;
  • provides more clarity on how such forms of occupation should be assessed but still leaves each case to be fought on its own facts;
  • ratepayers and their surveyors need to present convincing arguments that the spaces are interlinked and/or unable to be separately let.